No Economic Case For An Investment Agreement: “CUTS”

“There is no economic case for an agreement on investment,” said Pradeep S. Mehta, Secretary General of CUTS and a leading expert on WTO issues. “An effort by the rich countries under the OECD in 1995-1998 had also flopped, thus India’s strong opposition on investment makes eminent sense. This position is being backed by nearly 40 countries, and surprisingly by the US also. It needs to be buried forever at Cancun”.

According to a recent study by CUTS and University of Sussex under a project: EU-India Network on Trade and Development (EINTAD: Bridging the Differences-Analyses of Five Issues of the WTO Agenda which is being released at Cancun), it established that an investment agreement cannot enhance capital flows and will lock in policy spaces of countries, which they can ill afford.

The study was released yesterday by Dr. A. C. Muthaiah, President of the Federation of Indian Chamber of Commerce (FICCI) at a workshop on “Standards & Market Access” organised by CUTS alongwith FICCI, Consumers Association of UK etc. The CUTS-Sussex University EINTAD Study is jointly edited by Professor L. Alan Winters of Sussex and Mehta of CUTS.

The investment paper in the study has been done Professors Peter Nunnenkamp of Kiel Institute of World Economics and Manoj Pant of Jawaharlal Nehru University, New Delhi. Other four topics are competition policy, antidumping, textiles and clothing and movement of natural persons. Each of these papers are co-authored by eminent reseachers from Europe and India.

According to the study, regulation under GATS can address the apprehensions of both developed and developing countries. While developing countries fear “brain drain”, developed countries are worried about illegal immigration and temporary migration turning into permanent one. These are serious problems, which the negotations should address. Proposals for a GATS Visa etc should be taken up in full earnest.

The draft ministerial statement notes that the negotiations shall give special attention to sectors and modes of supply of export interest to developing countries, but does not explicitly state that concessions should include better market access for temporary workers under Mode-4. This limitation reflects the US intransigence against Mode-4.

“India should mould a Cairns-type alliance with about 50 developing countries having a similar interest and get a better text in the final ministerial declaration. We also have another problem on Mode-1 on export supply such as business process outsourcing and call centres, where protectionist pressures in the west are rearing their ugly head, which needs to be tackled headlong at Cancun”, Mehta added.

With a new and modern competition law, India should not have any problem with a multilateral framework on competition with a peer review mechanism rather than the more onerous WTO dispute settlement provisions. The CUTS-Sussex University EINTAD study also shows that this will not be such a problem.